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Behind the curious marketing of a middle-income "affordable" building in LIC, and some insider advice re the "130% AMI conundrum"

There's a huge new tower in Long Island City called Sven, 71 stories, with 958 units, 288 of them "affordable" for middle-income households earning 130% of Area Median Income, or AMI, the minimum required to get the lucrative 421-a tax break.

Developed by Durst Organization and designed by Handel Architects, the building offers amenities like a gym, yoga/dance studio, pool, and media room. Units boast floor-to-ceiling windows, Blomberg washer & dryer, polished quartz kitchen, and Grohe bath fixtures.

At the developer's website LIC Rent Regulated--they're not stressing "affordable"--they encouraged people to apply to the housing lottery, "[i]f your combined household income is between $68,229 and $192,400." (The lottery ended on 3/21/22.)

Another way of putting it: studios start at $1,990 and one-bedrooms at $2,132, as shown in the screenshot below.



A closer look

But wait. Take a look more closely at Housing Connect, and see that 49 studios were available at $2,189, for those with incomes between $75,052 and $121,420 (or one person) and $138,840 (for two). Also see the screenshot at bottom.

The Sven, via Housing Connect
Exactly only one studio was listed at $1,990, with the income floor $68,229 and the ceiling as noted above. 

(Quick math: annual rent of $23,880 would represent 35% of that minimum income, not the goal of 30%, while it would represent only 19.7% of $121,420.)

Similarly, just one 1-BR was available at $2,132, with 107 available at $2,345, 38 at $2,559, and 42 at $2,772.

One 2-BR was available at $2,560, with 40 available at $3,328. 

Less than they could ask

Note that even those not inexpensive numbers indicate less than what city guidelines allow. 

According to the Department of Housing Preservation and Development, under the 2022 AMI guidelines, developers could charge $3,035 for a studio, $3,253 for a 1-BR, and $3,903 for a 2-BR.

Curiously enough, all nine 3-BRs at the Sven were at $3,843, perhaps reflecting a relatively robust market.

The 2021 guidelines were considerably less: $2,263, $2,838, and $3,397, respectively. The Sven figures are below those 2021 guidelines.

Note: market-rate units at the building start at $3,679 for a studio, $4,080K for a 1-BR, and $6,070 for a 2-BR, albeit with potential concessions.

Guidance for developers

The property tax management firm MGNY Consulting offers a blog to share knowledge, and on 10/16/18 published what it called THE 130% AMI CONUNDRUM, noting that Gov. Andrew Cuomo's revision of 421-a, dubbed Affordable New York, induced most developers to choose "Affordability Option C with its very generous 130% AMI income limitation."

At that point, in 2018, the maximum rent was $1,979 for a studio, $2,487 for a 1-BR, and $2,993 for a 2-BR.

Observed the consultant:
A quick review of these figures shows that 130% AMI rents do not look or feel very “affordable” in the conventional sense of the word. In many neighborhoods of the City, the market rate rents are significantly lower the the maximum 130% AMI rents.

$2,487 for a brand new one-bedroom unit in prime Williamsburg might seem like a decent bargain, while in East New York (Brooklyn) this amount is 50-60% above the median market rate for a one-bedroom unit. This creates a unique challenge for developers whose projects are located in all but very few high-income neighborhoods of the City. The maximum allowable 130% AMI rents are simply not attainable. If the affordable units are advertised at these rates, no one will ever rent them.
(Emphases added)

What to do

To make a particular 130% AMI unit affordable, the consultant recommended estimating the market rate rent for a comparable unit, and set the affordable unit rent at 85-90% of the fair market estimate.

"When the affordable units are priced fairly, the lease-up process through Housing Lottery runs a lot more efficiently," the consultants advised. "The more you discount the affordable rents, the faster the units will be leased."

In higher-end neighborhoods, where the market rate rents exceed the listed 130% AMI rents, developers were encouraged to set the rent to the maximum 130% AMI level.

Interestingly enough, given that AMI has been steadily rising, even that latter tactic doesn't make sense. The market-rate rents well exceed the 130% rents at the two most recent Atlantic Yards/Pacific Park buildings, B4 (18 Sixth Ave., aka Brooklyn Crossing) and B15 (662 Pacific St., aka Plank Road).

However, as with the Sven, they can't ask for the full 130%.

For the Sven, on Housing Connect




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